SEC Puts A PEP In Its Step

On May 4, the Staff of the Securities and Exchange Commission (“SEC”) Division of Investment Management issued a “Staff Statement Regarding Pooled Employer Plans” (the “Statement”) permitting a pooled employer plan (“PEP”) to be treated as a “single employer” plan for purposes of certain registration exemptions under federal securities law. Most notably, the Statement removes a barrier to PEP investments in collective investment trusts (“CITs”) where self-employed individuals participate in the PEP. The Statement helps both PEPs and CITs by articulating a clear rule and imposing only modest compliance burdens.

Congress created PEPs under the SECURE Act of 2019, intending to expand access to retirement plans by allowing multiple unrelated employers to join a single 401(k) type plan administered by a “pooled plan provider” (“PPP”). PEPs can reduce the burdens of plan administration on smaller employers while providing access to a wide range of relatively low-cost investment options,